Let’s talk about what the swap rate is. This is the interest rate difference that occurs when buying and selling two different currencies. In Japan today, we have an ultra-low interest rate policy, so even if you deposit in a bank, you can hardly run out of interest. However, countries with 0 interest rates are rarer in foreign countries, and there are countries where the interest rate is as low as 5 percent and as low as 10 percent. Swap interest rate refers to the interest rate that occurs when trading in such national currency.
Swap interest rate refers to the difference in interest rates of the currencies being traded, but this swap interest rate is also a major feature of FX. By using this swap interest rate, you can generate a swap interest rate just by having a foreign currency. Swap rates vary from country to country, so if you have a currency of a country with a higher interest rate, that’s fine. Unless Japan’s current ultra-low interest rate policy changes, there is no doubt that foreigners have higher interest rates than Japan.